Mapping Shadow Banking in China: Structure and Dynamics

42 Pages Posted: 13 Feb 2018

See all articles by Torsten Ehlers

Torsten Ehlers

Bank for International Settlements (BIS)

Steven Kong

Hong Kong Monetary Authority

Feng Zhu

Bank for International Settlements (BIS)

Date Written: February 2018

Abstract

We develop a stylised shadow banking map for China with the aim of providing a coherent picture of its structure and the associated financial system interlinkages. Five key characteristics emerge. One defining feature of the shadow banking system in China is the dominant role of commercial banks, true to the adage that shadow banking in China is the "shadow of the banks". Moreover, it differs from shadow banking in the United States in that securitisation and market-based instruments play only a limited role. With a series of maps we show that the size and dynamics of shadow banking in China have been changing rapidly. This reveals a marked shift in the relative importance of different shadow banking activities. New and more complex "structured" shadow credit intermediation has emerged and quickly reached a large scale, while the bond market has become highly dependent on funding channelled through wealth management products. As a result, the structure of shadow banking in China is growing more complex.

Keywords: shadow banking, wealth management products (WMPs), investment receivables, entrusted loans, trust loans

JEL Classification: G2

Suggested Citation

Ehlers, Torsten and Kong, Steven and Zhu, Feng, Mapping Shadow Banking in China: Structure and Dynamics (February 2018). BIS Working Paper No. 701. Available at SSRN: https://ssrn.com/abstract=3122350

Torsten Ehlers (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Steven Kong

Hong Kong Monetary Authority ( email )

3 Garden Road, 30th Floor
Hong Kong
Hong Kong

Feng Zhu

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland
+41 61 280 9158 (Phone)
+41 61 280 9100 (Fax)

HOME PAGE: http://pantheon.yale.edu/~fz9

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